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incurred by the driver. As of the time of trial, AJF did not
retain the delivery manifests or the trip sheets for the years in
issue.
The drivers were authorized to and did use COD cash funds to
pay for any expenses such as towing charges or anything out of
the ordinary and would insert the invoice for the services in an
envelope.
When AJF suffered a shortage of drivers for its scheduled
deliveries, it hired leased labor from Manpower Temporary
Services. During 1988, 1989, and 1990, AJF claimed expenses for
leased labor in the amounts of $5,074, $16,946, and $22,332,
respectively. AJF also claimed deductions for "driver expenses"
for 1988, 1989, and 1990 in the amounts of $37,172, $68,157, and
$60,596, respectively. Respondent has allowed these deductions.
Circumstances Surrounding Ferrentino's Cashing of AJF's Delivery
Service and Fuel Reimbursements Checks
During the years in issue, Ferrentino controlled all the
checks issued from J.C. Penney to AJF. Ferrentino determined
whether he would cash checks personally or have them deposited
into AJF's corporate operating account. Ferrentino knew that AJF
corporate income was determined by its accountants by examining
deposits into AJF's bank account. AJF's gross income was
determined from deposits to the bank account which were reflected
in the cash receipts journal. He also knew that if the checks
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